Easier path for non-renewable consenting

The question of whether a consenting authority should consider the effects of greenhouse gas discharges on climate change in a non-renewable project is mostly based on the interpretation of an amendment made in 2004 of the Resource Management Act. The courts have recently clarified the question, and it is good news for non-renewable projects. By Greg Shaw and Sierra Sparksman at Kensington Swan Lawyers.

Genesis Power proposed to build a gas-fired power station at Rodney and applied to the Auckland Regional Council for related discharge consents. Section 104E of the Resource Management Act 1991 had earlier been considered by the High Court in a case involving Mighty River Power’s application to convert the old Marsden B into a coal-fired power station.

In that case the High Court held that under section 104E a consent authority can have regard to the effects of greenhouse gas discharges on climate change in applications relating to both renewable and non-renewable energy.

Although Mighty River Power obtained leave to appeal to the Court of Appeal, it abandoned the appeal after deciding not to move ahead with the conversion project. That left Genesis to take up the charge to have this important issue finally clarified.

Clarification came in December last year when the Supreme Court, in a split decision (4-1), upheld the Court of Appeal’s earlier finding granting Genesis the following declaration:

In considering the application by Genesis Power for a discharge permit relating to the discharge into air of greenhouse gases associated with the proposed Rodney power station, the Auckland Regional Council must not have regard to the effects of that discharge on climate change (Greenpeace New Zealand Inc v Genesis Power Ltd [2008] NZSC 111).

So, the matter is now settled. Consent authorities cannot take into account the effect on climate change of greenhouse gases that will be discharged from non-renewable projects in considering whether to grant a discharge permit.

Why was this not clear from the start? 

On the face section 104E seemed innocuous enough. It reads: “When considering an application for a discharge permit…to do something that would otherwise contravene section 15 or section 15B relating to the discharge into air of greenhouse gases, a consent authority must not have regard to the effects of such a discharge on climate change, except to the extent that the use and development of renewable energy enables a reduction in the discharge into air of greenhouse gases in absolute terms, or relative to the use and development of non-renewable energy.”

The legal issue for the courts was ­– what did the exception mean? 

Section 104E was introduced into the RMA in 2004 as an amendment through the Resource Management (Energy and Climate Change) Amendment Act 2004. The purpose of this amendment was to make provision for those exercising functions and powers under the RMA to have regard to efficiency of the end-use of energy; the effects of climate change; and those benefits to be derived from the use and development of renewable energy.

Prior to the 2004 amendment, the RMA only required local authorities to have regard to ‘any actual and potential effects on the environment’ of resource consent applications.  The amendment also required local authorities to plan for the effects of climate change, but not to consider the effects on climate change of discharges into air of greenhouse gases. At the time the Labour Government’s proposed emissions trading scheme, once implemented, was to be used to address the effects on climate change of discharges into air of greenhouse gases at a national not local level.

The majority of the Supreme Court first identified the issue as whether the Court of Appeal had been correct in interpreting the exception in section 104E as applying only to applications involving the use and development of renewable energy, or whether the exception also applies to energy projects using a non-renewable source. The majority judges accepted that section 104E did not specify explicitly whether or not the exception was limited only to proposals which involve the use and development of renewable energy. However, on analysis of the text they found that the legislative meaning demonstrated the exception is confined in that way.

This was because section 104E is case specific – the application must involve a renewable source, otherwise there is no possibility of reducing the discharge of greenhouse gases either absolutely or relatively. The phrase ‘to the extent’ also implies that the use of renewable energy is the subject of the application because, again, other uses would not result in any reduction. Also, the words ‘the use and development of renewable energy’ must relate to an application involving a renewable source. The phrase ‘enables a reduction’ necessarily implies an actual, rather than a hypothetical, use of a renewable source because a reduction can only result from actual use.

The Supreme Court majority then considered whether that interpretation was consistent with the purpose of the 2004 Amendment and were of the same view as the Court of Appeal – that the underlying policy of amendment was to require the negative effects of greenhouse gases causing climate change to be addressed on a national level while enabling the positive effects of the use of renewable energy to be assessed locally or regionally.

In the majority’s view that policy was best promoted by interpreting section 104E in a way ‘that permits the benefits of the use of renewable energy to be considered only in the context of applications based on the use and development of renewable sources because…it is only these applications that are capable of resulting in a reduction in the discharge of greenhouse gases’. Finally, the majority judges considered the record of the passage through Parliament of the 2004 Amendment and found support in the Explanatory Note to the Bill for the conclusions reached.

Accordingly, the majority held that when section 104E is interpreted by reference to its text, purpose and the record of the passage through Parliament of the legislation, the outcome was clear; the exception within it applies only to applications involving the use and development of renewable energy.

The practical effect of this was that a consenting authority was not only not required to undertake a comparative analysis of emissions reductions from a hypothetical renewable project for the site, but was expressly prohibited from considering any effects of the discharge to air of greenhouses gases from the Genesis project in assessing the application.

The Supreme Court’s decision is good news for developers of non-renewable projects. Consent authorities already need to carefully consider the enforcement and impact of discharges for non-renewable sources when considering discharge permits.

However, as the majority in the court has noted, expecting consenting authorities to undertake comparisons between a hypothetical renewable project and a non-renewable project to determine the extent the hypothetical development enables a reduction in the discharge of greenhouse gases – would be ‘artificial’, as no actual reduction in discharge can result and would ‘overwhelm the prohibition’.